When a multinational entity decides to sell its products abroad, one of the risks it faces is that the government of the foreign market charges the entity with dumping. Dumping occurs when:
Answer(s): B
Dumping is an unfair trade practice that violates international agreements. It occurs when an entity charges a price 1) lower than that in its home market or 2) less than the cost to make the product. Dumping may be done to penetrate a market or as a result of export subsidies.
Which of the following statements is true with respect to international transfer pricing?
Answer(s): C
Transfer pricing is an important aspect of the tax calculation for multinational corporations that transfer inventories between branches in different countries. Transfer prices charged to foreign subsidiaries may differ substantially from those charged to domestic subsidiaries for a variety of reasons. Limitations on taking profits out of a foreign country can be avoided by charging the foreign subsidiary a higher transfer price so that little or no profit exists to be repatriated.
An entity produces a country A and sells some of its output in country B. Selling prices are identical in the two countries. The corporate tax rates are 40% in country A and 20% in country B. Assuming that the entity does not increase or decrease production, it should <List A> sales in country B and set as <List B> a transfer price as possible, in order to minimize global taxes.
The tax-minimizing strategy is to minimize taxable income where tax rates are high and to maximize taxable income where tax rates are low. Consequently, the entity should sell more in country B but set a low transfer price. This dual strategy minimizes sales and profits in country A, minimizes cost of sales in country B. and maximizes sales and profits in country B.
An individual had taxable income of US $23,r_ir_ir' per year and paid US $8,000 in income tax. The individual's taxable income then increased to US $30,000 per year resulting in a US $10,000 income tax liability. The personal tax system being applied to this individual is:
The average t rate of the individual has decreased from 34.8% US $8,000 - $23,000) to 33.3% (US $10.000 Under a regressive tax system, the average tax rate falls as income rises, although the amount of tax paid may rise.
In most countries <List A> taxes tend to be <List B> with respect to income
Property taxes tend to be regressive. Taxpayers with lower incomes must pay a higher portion of their incomes for necessities, such as housing.
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